Mushayavanhu delivers inaugural MPS
ALL eyes are on Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu, who today is expected to deliver the 2024 Monetary Policy Statement (MPS), amid high hopes the policy interventions to be announced will anchor domestic stability and decisively deal with the inflation scourge.
Analysts, businesses and industry players expressed hope that the newly installed central bank chief will adequately address the issue of value preservation through measures that stabilise the currency and tame inflation.
Confederation of Zimbabwe Industries (CZI) President, Kurai Matsheza noted: “The issue is that we should respect fundamentals and we feel as we stand today, we hope that we will get the best or near best (interest) rates. We will continue to engage them if we feel there is need for a review.”
He said there was the need for reasonable or fair interest rates so that those who are importing will build up their capital faster in terms of either capital equipment or spares they want to buy.
“Also, on the interest rates, those who are going to borrow or are in borrowed positions, it will mean that the cost of doing business will come down and it will be good for business,” Matsheza said.
Concurring with Matsheza, Zimbabwe National Chamber of Commerce (ZNCC) president, Mike Kamungeremu, said as an association they wanted to see the governor increase the foreign currency retention ratio from 75 percent to about 80 percent.
“We wanted more, though we applauded the Governor for listening as we had lobbied for such a move because our members were affected. From the exporters’ side, for us to see more investment in the sectors we operate in, the retention ratios should be increased,” Kamungeremu said.
According to the ZNCC president, the surrender portions are still excessive in the context of economic circumstances, with the parallel market rate moving, which is hurting operators.
“With the parallel market moving, our exporters feel they are surrendering at a discounted rate and expenses being charged at the (open market rate), this is erasing profitability.
“So, some of our exporters have since either stopped exporting or reduced their exports,” he said.
Analysts and economists are also concerned about the proposed structured currency, which the RBZ said will be anchored on gold and foreign currency.
Economist, Dr Prosper Chitambara said; “To a greater extent, the exchange rate should be reflective of market dynamic forces of demand and supply.
“We expect the liberalisation of the exchange rate to deal with the distortions that have been creating the exchange rate premium.”
Regarding interventions on the currency front, he highlighted the importance of addressing the drivers of instability and unsustainable growth in money supply.
“Also strengthening the RBZ in line with what was observed by the IMF (International Monetary Fund) to ensure it is more autonomous and stronger.”
Dr Chitambara pointed out potential options, stating; “One such option is to link the local currency to an asset (an asset-backed currency), and another option is the currency board, which effectively is an exchange rate system where the local currency is fixed to an anchor currency.”
Economist, Gladys Shumbambiri-Mutsopotsi, emphasised the necessity for clarity regarding the exchange rate fund, stating; “It affects business from a transaction point of view and a value preservation point of view.”
Shumbambiri-Mutsopotsi expressed hope that the government would devise a strategy or implement measures to restore confidence and address
the escalating exchange rate, which has been exacerbated by inflation.
“For business, I think that’s the key expectation—to say that there is a need for a solution so that the cost of business can come down and there is a sense of stability in the market,” she highlighted.
Industry, business and analysts hope that the new governor will begin his tenure by repairing confidence in all sectors of the economy make everyone rally behind his ideas and drive the economy to growth and prosperity.